Apple’s boss of hardware and chip technologies is being considered as Intel’s new chief executive following the resignation of the previous CEO, Brian Krzanich.
Johny Srouji, Senior Vice President of Hardware Technologies at Apple, is allegedly one of the semiconductor experts on Intel’s list of potential candidates for the CEO job.... Read the rest of this post here
Apple isn’t the only smartphone maker steeling itself (and analysts) for disappointing results. Samsung Electronics issued earnings guidance for the final quarter of 2018 today that not only marks its first quarterly profit decline in two years, but also fell far below analysts’ expectations. The company attributed the drop to lower-than-expected demand for its memory […]
Apple isn’t the only smartphone maker steeling itself (and analysts) for disappointing results. Samsung Electronics issued earnings guidance for the final quarter of 2018 today that not only marks its first quarterly profit decline in two years, but also fell far below analysts’ expectations. The company attributed the drop to lower-than-expected demand for its memory chips, which in previous quarters had helped bolster its earnings even when its smartphone business was lackluster.
Samsung Electronics said it expects consolidated operating profit of about 10.8 trillion won ($9.67 billion), a 28.7 percent drop from the 15.15 trillion won it recorded in the same period a year ago, and below the 13.2 trillion won that analysts polled by Thomson Reuters had predicted. Consolidated sales are expected to be about 59 trillion won, a 10.6 percent decrease from 65.98 trillion won a year ago ($52.9 billion). Analysts had estimated sales of 62.8 trillion won.
In a statement, the company said “we expect earnings to remain subdued in the first quarter of 2019 due to difficult conditions for the memory business,” thanks to unexpectedly weak demand from some of its data center customers.
Last week Samsung rival Apple lowered its first-quarter earnings guidance, as CEO Tim Cook said that the company now expected revenue of $84 billion, down from its initial projection of $89 billion to $93 billion. The company blamed sluggish demand in emerging markets, but, in general, the smartphone market has been underwhelming over the past two years.
About a year ago, Gartner recorded the first ever decline for global smartphone sales since 2004, when it first began tracking the market. It attributed the drop to two main factors: fewer feature phone owners upgrading to smartphones because of the lack of quality “ultra-low-cost” smartphones, and current smartphone owners deciding to buy and keep quality devices for longer periods of time.
As networks get put under increasing pressure from ever-growing amounts of data, network equipment manufacturers are facing huge challenges to increase data transmissions speeds over further distances. As a premiere networking equipment company, Cisco wants to be prepared to meet that demand. Today, it opened up its checkbook and announced its intent to acquire Luxtera […]
As networks get put under increasing pressure from ever-growing amounts of data, network equipment manufacturers are facing huge challenges to increase data transmissions speeds over further distances. As a premiere networking equipment company, Cisco wants to be prepared to meet that demand. Today, it opened up its checkbook and announced its intent to acquire Luxtera for $660 million.
Luxtera, which was founded in 2001 and raised over $130 million, will give Cisco a photonic solution for that data networking problem. Rob Salvagno, head of Cisco’s M&A and venture investment team sees a company that can help modernize Cisco’s networking equipment.
“That’s why today we announced our intent to acquire Luxtera, Inc., a privately-held semiconductor company that uses silicon photonics technology to build integrated optics capabilities for webscale and enterprise data centers, service provider market segments, and other customers. Luxtera’s technology, design and manufacturing innovation significantly improves performance and scale while lowering costs,” he wrote in a blog post announcing the acquisition.
Photonics uses light to move large amounts of data at higher speeds over increased distances via fiber optic cable. Cisco sees this as a way to future-proof customer networking requirements, while keeping them on Cisco equipment. “The combination of Cisco’s and Luxtera’s capabilities in 100GbE/400GbE optics, silicon and process technology will enable customers to build future-proof networks optimized for performance, reliability and cost,” Salvagno wrote.
Another round of followups on Nvidia, and then some short news analysis. TechCrunch is experimenting with new content forms. This is a rough draft of something new – provide your feedback directly to the author (Danny at email@example.com) if you like or hate something here. Nvidia / TSMC questions Following up on my analyses this […]
Another round of followups on Nvidia, and then some short news analysis.
TechCrunch is experimenting with new content forms. This is a rough draft of something new – provide your feedback directly to the author (Danny at firstname.lastname@example.org) if you like or hate something here.
Nvidia / TSMC questions
Following up on my analyses this week on Nvidia (Part 1, Part 2) , a reader asked in regards to Nvidia’s risk with China tariffs:
but the TSMC impact w.r.t. tariffs doesn’t make sense to me. TSMC is largely not impacted by tariffs and so the supply chain with NVIDIA is also not impacted w.r.t. to TSMC as a supplier. There are many alternate wafer suppliers in Taiwan.
This is a challenging question to definitively answer, since obviously Nvidia doesn’t publicly disclose its supply chain, or more granularly, which factories those supply chain partners utilize for its production. It does, however, list a number of companies in its 10-K form as manufacturing, testing, and packaging partners, including:
Taiwan Semiconductor Manufacturing Company Limited (Taiwan, with a handful of facilities in mainland China)
To understand how this all fits together, there are essentially three phases for bringing a semiconductor to market:
Design – this is Nvidia’s core specialty
Manufacturing – actually making the chip from silicon and other materials at the precision required for it to be reliable
Testing, packaging and distribution – once chips are made, they need to be tested to prove that manufacturing worked, then packaged properly to protect them and shipped worldwide to wherever they are going to be assembled/integrated
For the highest precision manufacturing required for chips like Nvidia’s, Taiwan, South Korea and the U.S. are the world leaders, with China trying to catch up through programs like Made in China 2025 (which, after caustic pushback from countries around the world, it looks like Beijing is potentially scrapping this week). China is still considered to be one-to-two generations behind in chip manufacturing, though it increasingly owns the low-end of the market.
Where the semiconductor supply chain traditionally gets more entwined with China is around testing and packaging, which are generally considered lower value (albeit critical) tasks that have been increasingly outsourced to the mainland over the years. Taiwan remains the dominant player here as well, with roughly 50% of the global market, but China has been rapidly expanding.
U.S. tariffs on Chinese goods do not apply to Taiwan, and so for the most part, Nvidia’s supply chain should be adept at avoiding most of the brunt of the trade conflict. And while assembly is heavily based in China, electronics assemblers are rapidly adapting their supply chains to mitigate the damage of tariffs by moving factories to Vietnam, India, and elsewhere.
Where it gets tricky is the Chinese market itself, which imports a huge number of semiconductor chips, and represents roughly 20% of Nvidia’s revenues. Even here, many analysts believe that the Chinese will have no choice but to buy Nvidia’s chips, since they are market-leading and substitutes are not easily available.
So the conclusion is that Nvidia likely has maneuvering room in the short-term to weather exogenous trade tariff shocks and mitigate their damage. Medium to long-term though, the company will have to strategically position itself very carefully, since China is quickly becoming a dominant player in exactly the verticals it wants to own (automotive, ML workflows, etc.). In other words, Nvidia needs the Chinese market for growth at the exact moment that door is slamming shut. How it navigates this challenge in the years ahead will determine much of its growth profile in the years ahead.
Rapid fire analysis
Short summaries and analysis of important news stories
Saudi Arabia’s Crown Prince Mohammed bin Salman. FETHI BELAID/AFP/Getty Images
A law firm in the trenches against media unions – Andrew McCormick writes in the Columbia Journalism Review how law firm Jones Day has taken a leading role in fighting against the unionization of newsrooms. The challenge of course is that the media business remains mired in cutbacks and weak earnings, and so trying to better divide a rapidly shrinking pie doesn’t make a lot of sense to me. The future — in my view — is entrepreneurial journalists backed up by platforms like Substack where they set their own voice, tone, publishing calendar, and benefits. Having a close relationship with readers is the only way forward for job security.
Yesterday’s analysis of Nvidia’s challneges triggered a surge of mail from readers. The company has lost about half of its value over the past two months, and has mostly blamed a “crypto hangover” for the problem. But as I pointed yesterday, it’s really the three Cs: “Crypto, customers, and China.” There are nuances here worth […]
Yesterday’s analysis of Nvidia’s challneges triggered a surge of mail from readers. The company has lost about half of its value over the past two months, and has mostly blamed a “crypto hangover” for the problem. But as I pointed yesterday, it’s really the three Cs: “Crypto, customers, and China.” There are nuances here worth exploring though.
TechCrunch is experimenting with new content forms. This is a rough draft of something new – provide your feedback directly to the author (Danny at email@example.com) if you like or hate something here.
Rapacious capitalists and short-termism
One major vein of reader feedback was around the remarkable short-termism of my analysis, which (mostly) looked at Nvidia over the past 60 days. As a reader named Stephen wrote to me:
By focusing on the peak price from this summer and its fall you ignore the fact that the stock price today is nearly the same as it was in June of 2017. Nvidia was on a huge run because of Bitcoin and the associated run on GPUs by miners. With the crypto currency market in decline so is the demand for advanced GPUs.
There is nothing Nvidia can do about that. They profited greatly from that blip and now they are returning to normal.
That’s entirely fair. After diving in the 2008 financial crisis along with the rest of the market, Nvidia’s market cap steadily gained value for nearly seven years, growing from around $3.6 billion in 2008 to around $15 billion at the end of 2015, far outpacing the S&P 500 or other standard benchmarks.
As the crypto craze took off in 2016 though, that fairly linear growth became exponential. The company hit a peak this past August, reaching $175 billion in value, only to slam back down to Earth with today’s $91.2 billion. So in about three full years — even with the last two month’s 50% drop — the company has managed to grow its market value roughly six times. That’s very strong growth for an established company, even in the technology sector.
The key question though is whether today’s market value is backed by the company’s positioning in the marketplace.
As much as Nvidia has blamed the collapse of crypto prices for its challenging position, that is hardly the whole story. New competition from startups and its own customers are challenging the company on its plan to dominate a series of new workload applications like machine learning and autonomous vehicles.
If Nvidia succeeds, its market cap makes a whole lot of sense. But if it fails to keep a market dominant position in these new applications, then it will have to revert back to its core gamer audience, and today’s market cap makes no sense given the limited size and growth of that market.
China / Nvidia
China remains a major site for manufacturing and assembly. STR/AFP/Getty Images
Another strain of readers asked for more analysis around China tariffs and their potential effect on Nvidia (you short sellers are a fascinating lot).
Let’s be clear on my position: I expect the trade conflict to get worse, not better. There is not a single issue for Trump that has better optics, political positioning, and broad support than improving the status quo around China trade. There is broad bipartisan agreement that the status quo is untenable, and while folks might disagree about specific approaches or tactics, no one thinks that China has played fair in trade for years. Trump can look like a fighter for the American worker while bringing (some) Democrats and most of his entire party on board. It’s a potent issue.
That places Nvidia in a real bind, because China is a critical end market for its products, and its manufacturing is heavily intertwined with Chinese supply chains. As just an example of this, just a few months ago, Nvidia chose TSMC over Samsung in a bidding competition to produce its large GPUs.
As Arman and I have talked with some supply chain folks about tariffs, the general consensus is that low tariffs won’t have much impact, but higher tariffs will force huge changes in the way supply chains are built to counteract those costs. That seems to be the conclusion of Debby Wu at Bloomberg as well within the iPhone supply chain world.
That said, as much as I think there should be caution on this front, Nvidia is in a relatively enviable position. Its contract manufacturers will have to deal with the tariffs directly, but Nvidia can move its manufacturing to wherever it needs to go — Korea, Vietnam, back to the U.S. or wherever. There is of course some time lag, but I would be much more worried about TSMC’s position long-term than Nvidia’s.
Short summaries and analysis of important news stories, outside our main analysis
SBI Says It Made An Error Allocating Shares in SoftBank IPO – one of the underwriters for SoftBank’s IPO accidentally sent lower share numbers to some buyers, leading to speculation that the company was dealing with a mass selloff. Things seem to be righted, and blockchain enthusiasts will once again get to scream “BLOCKCHAIN” at another financial markets screwup.
The North Face – Cory Arcangel does a great job of decomposing the modern EDM “product” and placing it into today’s context — with some nice connections to our discussion above about Nvidia. “EDM is the perfect reflection of 2018. It is intense, adrenaline-fueled, all-night music made by hyper efficient, work-a-holic, laptop bureaucrats.” Talking about Steve Angello and his rapid series of engagements on the EDM circuit: “Instead, he—his literal, physical self—was being shipped around, with minutes to spare, as part of an intricate just-in-time supply chain. Like Apple’s, this supply chain is also exceedingly light—Angello is the only asset required.” Hat tip to Robert Cottrell at The Browser for this one.
Semiconductor equipment sales forecast: $62B in 2018 a new record – More uplift for 2018, if some challenges in 2019 forecasted. “In 2018, South Korea will remain the largest equipment market for the second year in a row. China will rise in the rankings to claim the second spot for the first time, dislodging Taiwan, which will fall to the third position.” It will be interesting to see how tariffs affect these numbers next year.
More semiconductors probably. And Arman and I are side glancing at Yelp these days. Any thoughts? Email me at firstname.lastname@example.org.
This newsletter is written with the assistance of Arman Tabatabai from New York
Apple’s custom T2 chip provides unrivaled privacy and industry-leading security features never before present on Mac. Some newer Mac models include this chip and others do not. iDownloadBlog shows you how to identify whether your Mac computer has the Apple T2 chip.
Certain Mac models take advantage of a second-generation Apple security chip, called T2. Without it, you won’t enjoy advanced secure boot capabilities, hardware-accelerated flash storage encryption or other perks. Some Mac computers have the Apple T2 security chip while others do not. In this brief step-by-step tutorial, iDownloadBlog will show you how to identify Mac models with the Apple T2 chip.... Read the rest of this post here
Offering improvements in power, size and scalability, Intel’s new 5G-enabled modem supports theoretical peak speeds of up to 6 gigabits per second, or three to six times faster than the latest LTE modems available today.
Sony’s PlayStation business continues to come on leaps and bounds after a 27 percent increase in gaming revenue helped the company record a $2.1 billion profit in Q2. The PlayStation division is Sony’s top performer and once again that was the case, carding $4.9 billion in sales during the quarter with an operating profit of […]
The PlayStation division is Sony’s top performer and once again that was the case, carding $4.9 billion in sales during the quarter with an operating profit of $800 million for the division, that’s up around 65 percent year-on-year. That caused Sony’s operating profit to jump by 59 percent as revenue rose six percent to $19.6 billion.
In raw sales, Sony has sold over 86 million PS4 consoles to date thanks to shifting 3.9 million during Q2, though that’s down a little on 4.2 million one year previous. However, a strong appetite for games continues. Exclusive title ‘Gold of War’ sold over three million copies in its first three days of sale in April, while ‘Spider-Man’ clocked over 3.3 million sales in its first three days last month.
Meanwhile, Sony’s PlayStation business continues to grow. The company just announced that it’s shipped over 86 million PS4 consoles worldwide; for comparison, the last figure given for the PS3 was 80 million back in 2013, while the original PlayStation managed around 102 million.
Outside of gaming, Sony saw big gains in sales within financial services, its second-biggest revenue generator which jumped 27 percent, and semiconductors, up 11 percent, although losses for its troubled mobile unit widened to reach $265 million for the quarter while mobile revenue declined by 32 percent year-on-year.
The Sony is so bullish about the rest of the year that it has raised its full-year operating profit forecast to 870 billion JPY, that’s $7.7 billion and an increase of about 30 percent to the original target.
That’s partly down to the strong performance of its PlayStation but also the impact of its $2.3 billion buyout of EMI Music Publishing, as pointed out by Bloomberg. Sony previously held a 39.8 percent share in the venture but the deal — which just got the regulatory green light in Europe — will see the value’s of original stake increase while adding additional revenue from the business. Tellingly, those EMI gains represent 55 percent of the additional revenue Sony is forecasting to hit this financial year.
Apple’s upcoming iPad Pro tablets for 2018 will use an Apple-designed A12X Bionic chip, which is an enhanced version of the regular A12 Bionic chip in the iPhone XS/XS Max/XR smartphones feature a more powerful GPU for faster graphics.
Now that a Chinese regulatory filing has all but confirmed a new iPad-focused Apple media event this month, fresh new details pertaining to the upcoming refresh continue trickling in on an almost daily basis. According to Brazilian iOS developer Guilherme Rambo, the 2018 iPad Pro refresh will include a new Apple-designed A12X Bionic system-on-a-chip.... Read the rest of this post here
Apple touts the cybersecurity of its iPhone, but less can be said for the exclusive manufacturer who makes the processor for the iPhone. Semiconductor foundry TSMC, or Taiwan Semiconductor Manufacturing Company, was hit by a virus late Friday night, which forced it to shut down several factories according to Debbie Wu at Bloomberg. The virus […]
Apple touts the cybersecurity of its iPhone, but less can be said for the exclusive manufacturer who makes the processor for the iPhone.
Semiconductor foundry TSMC, or Taiwan Semiconductor Manufacturing Company, was hit by a virus late Friday night, which forced it to shut down several factories according to Debbie Wu at Bloomberg. The virus and the shutdown were confirmed by TSMC representatives.
It is not clear at this time which factories were hit, or whether those factories were producing the iPhone’s main processor. Apple is expected to unveil new iPhones this fall, and supply chain disruptions in the critical month of August could have significant adverse consequences for the rapid availability of the new phone before the key Christmas holiday.
TSMC has grown to become the largest independent semiconductor foundry in the world, with profits last year of $11.6 billion. The company has benefitted from partnerships with smartphone companies like Apple, which produces the designs for its own A-series chips and then contracts out their manufacturing to foundries.
Alongside Foxconn, TSMC is one of Taiwan’s most important and profitable companies, and is an obvious target both due to its wealth and scale, as well as its centrality in the increasingly fraught cross-straight relations between China and Taiwan. China has made becoming the world leader in semiconductors a national priority, and companies like TSMC are deeply competitive with mainland foundries.
That’s the paranoid context for many tech executives in Taiwan, and while the culprit of this particular virus is not yet publicly known, eyes and fingers are already beginning to point in one direction.
More information about the attack is expected to be available next week.